No drop in house prices in sight, according to the ASB in its quarterly economic forecasts

New Zealand house prices are unlikely to fall over the next year, but price growth will slow, according to the ASB in its quarterly economic forecast released on Friday.

After gaining 27% last year, house prices are expected to rise 10% by the end of this year and 5% by the end of 2022, said Nick Tuffley, chief economist of the ‘ASB.

“We believe house prices will still end 2021 up by around 10%. This is mainly because of all the strong growth we’ve seen in the first few months of the year, and we expect prices to be relatively stable for much of the rest of the year and then start over again. to grow at a rate of about 5%. after that.”

First-time homebuyers in Northland say home prices are going

JOHN BISSET / Stuff

First-time homebuyers in Northland say home prices are going “crazy” due to lack of listings. (File photo)

If anything, the market should perform better than expected, even investor interest remains at a reasonable degree, he said.

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Low mortgage rates and lack of supply have fueled a record streak for the real estate market since the Covid-19 pandemic. However, house price growth is expected to slow significantly by mid-2022, in part due to government housing policy changes announced earlier this year.

In March, Prime Minister Jacinda Ardern said the government would double the light line test on residential properties, as part of a plan that included spending billions to increase housing supply.

ASB chief economist Nick Tuffley said despite current confidence in house price growth, it would likely be

PROVIDED / Contents

ASB chief economist Nick Tuffley said despite current confidence in house price growth, it would likely be “dead in the water” by next year.

Tuffley said ASB expects sales activity and price increases to slow this year. However, the foundations of the market have remained strong.

“There does not appear to have been a widespread collapse in investor interest in entering the market, which was one of the unknowns in the face of the government’s announcement in March.

“We still have very, very low interest rates at the moment, and in a number of parts of the country – particularly Auckland and Wellington – there just weren’t enough houses built.”

Demand for housing construction has reached an all-time high and the construction sector is struggling to keep up.

New Zealand had been fortunate enough to already benefit from free movement within the country, but a relatively slow pace of vaccination against Covid-19 meant the border would likely remain essentially closed until 2022.

This is expected to limit growth this year, with annual gross domestic product (GDP) growth of around 1.5-2%, until population growth and visitor spending increases.

GDP fell 1 percent worse than expected in the three months to December 31, pulling GDP down 2.9 percent for the year.

But overall, the country has weathered the Covid-19 pandemic relatively well, Tuffly said, surpassing many of its trading partners.

The global rollout of the Covid-19 vaccine was helping spur economic growth, but that growth was also causing problems.

“Much of the activity that did not take place in the first half of 2020 is taking place now and has pushed demand for shipping and global commodity prices up as global demand for goods and services is picking up, ”Tuffley said.

The disruption of the global supply chain would continue until 2021. Some container ships are said to have bypassed New Zealand due to its isolation, further hampering the supply of goods, he said.

Prime Minister Jacinda Ardern announced in March a package designed to help tackle the housing crisis.

ROBERT KITCHIN / Tips

Prime Minister Jacinda Ardern announced in March a package designed to help tackle the housing crisis.

Customers should expect to see prices rise over the next several months as cost pressures intensify.

On the bright side, New Zealand exporters were benefiting from near-record global prices for key commodities such as dairy, and the launch of quarantine-free journeys between New Zealand and Australia, albeit on hold. on occasion had been a bonus. .

“The opening of the trans-Tasman bubble means there is good news on the horizon for the tourism and hospitality industry,” Tuffley said.

Demand for housing construction is at an all time high.

KIRK HARGREAVES / Tips

Demand for housing construction is at an all time high.

“Although interest has been low so far, there are reports of increased interest from Australians to visit New Zealand during the winter – and the ski season in particular.”

However, the country is nowhere near making up for the loss of income from international tourism and will continue to feel the pain.

ASB expected wage growth to accelerate this year, which was positive for workers but would push inflation up.

The bank expects increases in the Reserve Bank’s official exchange rate from next May, which would help contain rising house prices.


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